Russia to Terminate Agreement on Management of Armenia's Railway

The state company 'Russian Railways' is set to terminate the concession management agreement of the 'South Caucasian Railway' (SCR) signed with Armenia in 2008. This was reported to RTVI by a source familiar with the negotiations between Russia and Armenia.

The information has been confirmed by the Russian Ministry of Transport.

In August 2018, searches were conducted at the SCR office over suspicions of tax evasion amounting to 19,000 US dollars. SCR announced that documents were seized during the operation. Subsequently, Armenian Prime Minister Nikol Pashinyan stated that "certain legal processes are taking place around the company," but urged not to turn the situation into "a tragedy."

At the end of December, the Investigative Committee of the Republic announced that they were examining the activities of SCR over the past 10 years, verifying the efficiency of 226.8 million dollars in investments. The company has claimed that the investigation is "biased." According to RTVI’s source, seven cases have been initiated against SCR, which have been combined into one case. During the searches, the entire archive of documents—from the company's inception until 2018—was seized, severely complicating SCR's current operations. The company attempted to reclaim the documents through the courts, but their requests were denied.

The management of the 'South Caucasian Railway' considers the financial claims unfounded. They emphasize that “over the more than 10 years of SCR’s operations, the total time of inspections by tax authorities has been 3 years.” Moreover, in recent years, PricewaterhouseCoopers has conducted corporate audits.

According to RTVI’s source, if Armenia did not wish to exert pressure on Russia but instead understand the situation, it would approach an international court. “The agreement provides, for example, the possibility of appealing to Paris arbitration to resolve disputed issues, however, the Armenian side prefers to exert pressure through ‘the sword of Damocles’ of criminal cases,” the source notes.

They attempted to resolve the issue at the governmental level. The Russian Ministry of Transport was negotiating with Armenia’s relevant ministry and Deputy Prime Minister Mher Grigoryan. Moscow offered to close the criminal case in response, they were prepared to assist Yerevan with additional investments. Russia also suggested conducting a new independent audit if the Armenian authorities were unwilling to simply abandon their claims.

The negotiations yielded no results, thus Moscow is contemplating withdrawing from the agreement with Armenia, says RTVI's source. Officially confirming that the negotiations have led nowhere, the Russian Ministry of Transport stated, “Armenia has created a situation in which SCR cannot operate normally; all documents from the past 10 years have been seized, unfounded accusations have been made, and no guarantees have been provided. Our arguments that earlier inspections found no violations have been ignored, and arguments regarding compliance with the concession terms are disregarded,” said Vladimir Tokarev, Deputy Minister of Transport of Russia.

He also confirmed that the Russian side has begun to conduct a “serious study” regarding the early termination of the agreement on the management of Armenia’s railway.